Balancer Labs to Wind Down After $128M Hack, Protocol Moves Fully to DAO Governance
Balancer Labs, the corporate entity behind the Balancer decentralized exchange, will shut down following a $128 million exploit and mounting legal and financial pressure. Co-founder Fernando Martinelli disclosed the decision in a governance forum post dated March 23, 2026, saying the company had become a legal liability and was operating with no revenue under its current setup.
The move follows an attack on November 3, 2025, when hackers exploited a flaw in Balancer V2 ComposableStablePool contracts tied to arithmetic precision loss in invariant calculations. The issue enabled manipulation of pool balances and unauthorized withdrawals. Roughly $128.64 million was drained in under 30 minutes across six networks, including Ethereum, Base, Polygon, and Arbitrum, making it one of the biggest DeFi hacks of 2025 despite multiple audits.
Martinelli said the aftermath drove reputational damage, a steep decline in TVL, and BAL trading below its net asset value. He described the six months after the incident as the toughest stretch since Balancer's 2020 launch, adding that the corporate structure had shifted from asset to burden.
Balancer's core protocol will continue operating under a DAO-first model. Martinelli said the protocol remains economically viable, generating more than $1 million in annualized fees over the past three months. The overhaul centers on running Balancer through the DAO, the Balancer Foundation, and a lean service-provider framework. Key contributors, including CEO Marcus Hardt, are expected to move to Balancer OpCo, contingent on a community governance vote via a Balancer Improvement Proposal (BIP). Martinelli will not retain a formal role after the wind-down but plans to remain available as an informal adviser.
Alongside the governance shift, Martinelli backed a major tokenomics reset. Proposals include ending BAL emissions immediately, arguing inflationary incentives have diluted holders and fueled a "circular bribe economy." He also called for phasing out veBAL governance, which he said has been heavily shaped by external players such as Aura Finance.
A key change would redirect 100% of protocol fees to the DAO treasury, up from the current 17.5%. Under V3, the protocol share would be reduced to 25% to encourage more organic liquidity. The plan also introduces a BAL buyback program aimed at providing exit liquidity for holders who prefer not to remain through the transition.
Product priorities would narrow to reCLAMM, liquidity bootstrapping pools (LBPs), stables/LST pools, weighted pools, and fewer EVM chains.
Balancer, launched in 2020, is known for customizable automated market makers and programmable liquidity, with integrations spanning Aave, Gnosis, Lido, and CoW Swap. The next 12 months are positioned as a decisive period: the DAO must vote on operational and tokenomics changes, and if approved, Balancer will attempt to demonstrate that a lean, community-led structure can deliver product-market fit and long-term sustainability. For BAL holders, the path forward is framed as a choice between staying to support the restructure or taking the buyback exit. The core smart contracts and liquidity pools remain live.
